Hello!
My blog hopes to empower you on your money journey. Each week I will decode, demystify and mark a trend that has to do with your money life. The format is one explainer and three questions answered. Write to me at mailme@monikahalan.com with questions you would like answered or things you want explained. Or tag me on my social media handles: @monikahalan.
You can hear this episode on my podcast Let’s Talk Money With Monika Halan
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Let’s talk money!
Should I worry about inflation?
Inflation is just the annual rise in prices. It can be due to extra demand or less supply in the economy. For example, during covid, supply contracted and prices went up. Prices also go up if central banks print too much money – like the US did over covid and inflation rates went up from almost zero to over 8% in under two years.
India has seen inflation rates as high as 10-14% in the past, but in 2015 RBI became an inflation targeting central bank with a target band of 2-6% inflation and a focus on getting it to stay at 4%.
You need to think about inflation in two ways:
- You need to budget for larger future spends. Rs 50,000 a month today at a 4% inflation will need Rs 75,000 in 10 years, Rs 1 lakh in 20 years and Rs 1.6 lakh in 30 years.
- Investments must earn more than inflation – fixed income products such as FDs do not keep your return head over inflation. Equity long term return is 12%, this keeps it ahead of inflation and taxes. Begin with a basic index fund on the Nifty 50 or Sensex
The best antidote to inflation is to keep earning in current money. Keep your skills honed so that even at 60 you have another 15 years of work though consulting or gig works. Plan to not use your retirement corpus till age 65 at the very least.
In short, inflation:
- Is the annual rise of prices that affect us consumers. has been as high as 10-14% in the past. 2016. RBI became an inflation targeting central bank. Expectation of inflation of around 5%.
- Should worry us, Rs 50k spend today, at 4% inflation will be 75k in 10 years and 1 lakh in 20 years.
- in the economy means that we need incomes and asset returns to keep ahead of inflation.
Q1
I live with my partner and he lost his job during the pandemic. I’m the breadwinner and having been paying for our rent, house expenses etc for the last two years. He got a job last month however, I’ve spent lakhs on our relationship, and not once have we talked about how much I’ve contributed to us financially and what he plans to do now that he’s earning. How do I broach this conversation and what should I talk about exactly?
If your partner has not approached it himself, that should tell you something about him, no?
You might be feeling guilty about having these thoughts
One way to think about it is to imagine if it had been you on the other side. Would you have offered to pay?
It also might be that he accumulated debt in that period and is now paying it off – that is to give him the benefit of the doubt – but in any case, he should have broached the topic himself.
You can begin the talk with saying that we need to sit down and have a serious money talk.
It is good to not get emotional with you discuss this – best to keep accusation and blame out of the conversation
The more matter of fact you are the better it will be
Ask the question – I have funded us for two years; do you now plan to pay for the next two years? Say that you have no savings because you were spending for two instead of one. Tell him that you need to make up for lost time.
You should be prepared that the talk might cause a rift that is irrevocable.
But then do you want to be in a relationship that is inherently an unequal one?
In short:
- If he has not broached the topic, it says something about him. What would you have done had it been you on the other side? It could also be that in those two years he has accumulated debt and is paying that off. Whatever may be the reason, he should have approached the topic and offered to pay for the next two years to make up for the time he did not
- You need to schedule time and say that you want to discuss money.
- Keep emotions tears and blame out of the talk, be matter of fact
- Ask him if he will now take care of the next two years of expenses
- Say that your savings are depleted and you have missed great opportunities for investments in the past two years.
- Whatever the outcome of the talk, you need to have this sorted
Q2
My girlfriend and I are thinking of moving in together. How should we think of joint finances?
It is very important to sort out the money question before you move in. Most fights between couples happen over chores and money. Different value systems around money can cause a lot of friction. I want to share some basic points on this subject. Here goes:
- Have the money talk before you move in
- Most relationships break up due to mismatches in value systems around money
- Use the 3-bank-account system – your spend it account gets funded by both – equal or pro rata
- Rough rule of thumb is that you keep half the money for monthly spends, 30% for EMIs and 20% savings.
- You will have to get into the nitty gritty as to what are joint expenses
- Start with the most obvious ones – rent, home help and basic food, eating out together, holidays together, wifi – keep adding to the list
- Personal expenses on things like cosmetics, clothes, shoes, watches, gadgets can be kept out of the joint finances
- You and friend build assets in your own names only
- If your money conversation is amiable and non-confrontational, the relationship together begins on a more stable base
Q3
I began earning six months ago and I still live at home. I’m not sure how to contribute to the household expenses. I feel awkward offering to pay my parents! What is the right thing to do?
What a lovely situation to be in. Who would not want mom’s cooking and a home to stay and be so looked after! I have some points for you to consider:
- Most Indian parents will not want you to fund the home
- Think of gifts for parents
- Think of buying fruits and other higher value food stuffs for the home regularly
- You have a golden moment in your life – make your savings ratios as high as 60-80%